Consumers "win" as re-mortgaging booms
26 April 2004
More and more British homeowners are taking advantage of low interest rates cheaper mortgage rates to re-mortgage their properties.
New research shows that the re-mortgaging market has grown by a staggering 255 per cent since 2000.
Datamonitor, who carried out the research, identified the consumers as the "winners" in this surge, due to the fact lenders are being forced to continually offer competitive rates to retain customers.
According to its figures, almost four in ten mortgage holders chose to re-mortgage in 2003 - and more than a quarter of them had done so more than once in the last five years.
It suggests homeowners are cashing in on lower rates to save money as well as borrowing larger amounts through re-mortgaging; just over a third (35 per cent) of borrowers said they had withdrawn equity from their properties.
For many the reason for withdrawing equity was to undertake home improvements or create extensions. Yet an increasing number are choosing to re-mortgage to consolidate existing debts.
Datamonitor financial analyst Karina Purang said those looking to re-mortgage should beware fees when changing mortgages.
Many lenders make customers pay a penalty for redeeming a loan during the fixed rate or discounted period of a deal, with some even making borrowers pay a fee if they move mortgages after the introductory period has ended.
The Liberal Democrat trade and industry spokesman Malcolm Bruce also expressed concerns. He urged lenders to "act responsibly" in light of the re-mortgaging boom. "If interest rates rise further, borrowing against house valuations that may not be sustainable will result in catastrophe for thousands."
He sensibly added, "Borrowing to the edge of your means . . . is hardly making the most of your assets."
The average value of a re-mortgaging loan has increased from £61,000 to £80,232 since 2000.